College tuition and household savings and consumption

Despite the high cost of college, there has been little study of the adequacy of household savings and other resources available to fund college. To gauge their adequacy this paper examines households’ standard of living as they pay for college. Using the Consumer Expenditure Survey, the main finding is that households appear to do a relatively good job smoothing their consumption into the academic year, despite large expenses. This is consistent with the Life-Cycle Theory of saving and consumption. There is some evidence of a delayed decline in consumption, and of a decline for households with children first beginning college, but the magnitudes of these declines are rather small.